(2019-02-19) Wei Status As A Service

Eugene Wei: Status as a Service (StaaS). Let's begin with two principles: (tldr: every Human System involves Status Games; ignoring how that might effect user behavior will lead to ugly surprise)

We have longstanding ways to denominate and measure financial capital and its flows.

We have no such methods for measuring the values and movement of social capital

Social capital has much to say about why social networks lose heat, stall out, and sometimes disappear altogether. And, while we may not be able to quantify social capital, as highly attuned social creatures, we can feel it.

Social capital is, in many ways, a leading indicator of financial capital, and so its nature bears greater scrutiny.

we can start to demystify social networks if we also think of them as SaaS businesses, but instead of software, they provide status.

Traditional Network Effects Model of Social Networks

One of the fundamental lessons of successful social networks is that they must first appeal to people when they have few users

The second fundamental lessons is that social networks must have strong network effects so that as more and more users come aboard, the network enters a positive flywheel of growth

Even before social networks, we had Metcalfe's Law on telecommunications networks

But dig deeper and many many questions remain. Why do some large social networks suddenly fade away, or lose out to new tiny networks? Why do some new social networks with great single-player tools fail to transform into networks, while others with seemingly frivolous purposes make the leap?

What ties many of these explanations together is social capital theory

Utility vs. Social Capital Framework

Classic network effects theory still holds, I’m not discarding it. Instead, let's append some social capital theory. Together, those form the two axes on which I like to analyze social network health. (compelling)

Actually, I tend to use three axes. For this post, though, I'm only going to look at two of them, utility and social capital, as the entertainment axis adds a whole lot of complexity which I'll perhaps explain another time.

Utility doesn't require much explanation, though we often use the term very loosely and categorize too many things as utility when they aren't that useful (we generally confuse circuses for bread and not the reverse; Fox News, for example, is more entertainment than utility, as is common of many news outlets)

The other axis is, for a lack of a more precise term, the social capital axis, or the status axis.

Competition on raw utility tends to be Darwinian, ruthless, and highly legible.

The creation of a successful status game is so mysterious that it often smacks of alchemy

With the rise of Instagram, with its focus on photos and filters, and Snapchat, with its ephemeral messaging, and Vine, with its 6-second video limit, for a while there was a thought that new social networks would be built on some new modality of communications. That's a piece of it, but it's not the complete picture, and not for the reasons many people think, which is why we have seen a whole bunch of strange failed experiments

a useful metaphor is one of the trendiest technologies: cryptocurrency.

Social Networks as ICO's

How is a new social network analogous to an ICO?

Both social networks and ICO's tend to drive skeptics crazy because they seem to manufacture value out of nothing. The shifting nature of scarcity will always leave a wake of skepticism and disbelief

Almost every social network of note had an early signature proof of work hurdle. For Facebook it was posting some witty text-based status update. For Instagram, it was posting an interesting square photo.

Successful social networks don't pose trick questions at the start, it’s usually clear what they want from you.

you might complain that your

photos are better composed and more interesting at a deep level of photographic craft than those of Kim Kardashian. The difference is, they bring a massive supply of exogenous pre-existing social capital from another status game, the fame game, to every table, and some forms of social capital transfer quite well across platforms

If you've ever joined one of these social networks early enough, you know that, on a relative basis, getting ahead of others in terms of social capital (followers, likes, etc.) is easier in the early days

Why Proof of Work Matters

Value is tied to scarcity, and scarcity on social networks derives from proof of work.

Musical.ly created a hurdle for gaining followers and status that wasn't easily cleared by many people. However, for some, especially teens, and especially girls, it was a status game at which they were particularly suited to win. And so they flocked there, because, according to my second tenet, people look for the most efficient ways to accumulate the most social capital.

What changed Twitter, for me, was the launch of Favstar and Favrd (both now defunct, ruthlessly murdered by Twitter), these global leaderboards that suddenly turned the service into a competition to compose the most globally popular tweets

It's critical that not everyone can quip with such skill. This gave Twitter its own proof of work, and over time the overall quality of tweets improved as that feedback loop spun and tightened

Still, sometimes I miss the halcyon days when not every tweet was a thirst trap.

Thirst for status is potential energy. It is the lifeblood of a Status as a Service business.

Conversely, let's look at something like Prisma, a photo filter app which tried to pivot to become a social network

It worked well. Too well. Since almost any photo could, with one-click, be turned into a gorgeous painting, no single photo really stands out. The star is the filter, not the user, and so it didn't really make sense to follow any one person over any other person.

In contrast, while Instagram filters, in its earliest days, improved upon the somewhat limited quality of smartphone photos at the time, the quality of those photos still depended for the most part on the photographer

This is not the only way a social network can achieve success

Facebook's Original Proof of Work

Facebook launched with one of the most famous proof of work hurdles in the world: you had to be a student at Harvard.

rolling out, first to Ivy League schools, then to colleges in general, Facebook scaled while maintaining a narrow age dispersion and exclusivity based around educational credentials.

Layer that on top of the broader social status game of stalking attractive members of the other sex that animates much of college life and Facebook was a service that tapped into reserves of some of the most heated social capital competitions in the world.

Social Capital ROI

Young people, with their much higher usage rate on social media, are the most sensitive and attuned demographic to the payback period and ROI on their social media labor. So, for example, young people tend not to like Twitter but do enjoy Instagram.

most tweets are barely seen by anyone at all.

Pair that with the fact that young people's bias towards and skill advantage in visual mediums over textual ones and it's not surprising Instagram is their social battleground of preference (video games might be the most lucrative battleground for the young if you broaden your definition of social networks, and that's entirely reasonable, though that arena skews male).

I can still remember posting the same photos to Flickr and Instagram for a while and seeing how quickly the latter passed the former in feedback

Some features can increase the reach of content on any network. A reshare option like the retweet button is a massive accelerant of virality on apps where the social graph determines what makes it into the feed.

TikTok is an interesting new player in social media because its default feed, For You, relies on a machine learning algorithm to determine what each user sees; the feed of content from by creators you follow, in contrast, is hidden one pane over. If you are new to TikTok and have just uploaded a great video, the selection algorithm promises to distribute your post much more quickly than if you were on sharing it on a network that relies on the size of your following, which most people have to build up over a long period of time

graph-based social capital allocation mechanisms can suffer from runaway winner-take-all effects. In essence, some networks reward those who gain a lot of followers early on with so much added exposure that they continue to gain more followers than other users, regardless of whether they've earned it through the quality of their posts. One hypothesis on why social networks tend to lose heat at scale is that this type of old money can't be cleared out, and new money loses the incentive to play the game

It's not that the existence of old money or old social capital dooms a social network to inevitable stagnation, but a social network should continue to prioritize distribution for the best content, whatever the definition of quality, regardless of the vintage of user producing it

Otherwise a form of social capital inequality sets in

Why copying proof of work is lousy strategy for status-driven networks

Most of these near clones have and will fail. The reason that matching the basic proof of work hurdle of an Status as a Service incumbent fails is that it generally duplicates the status game that already exists.

This isn't to say you can't copy an existing proof of work and succeed

You can build a better status game or create a more valuable form of status. Usually when such displacement occurs, though, it does so along the other dimension of pure utility.

Facebook's attempt to duplicate just about every social app with any traction anywhere. The problem with copying Snapchat is that, well, the reason young people left Facebook for Snapchat was in large part because their parents had invaded Facebook

The pairing of Facebook's gigantic graph with just about almost any proof of work from another app changes the very nature of that status game, sometimes in undesirable ways. Do you really want your coworkers and business colleagues and family and friends watching you lip synch to "It's Getting Hot in Here" by Nelly on Lasso?

Of course, the canonical Facebook feature grab that pundits often cite as having worked is Instagram's copy of Snapchat's Stories format. As I've written before, I think the Stories format is a genuine innovation on the social modesty problem of social networks

Ironically, as services add more and more filters and capabilities into their story functionality, we see the proof of work game in Stories escalating

The Greatest Social Capital Creation Event in Tech History

the event that created the greatest social capital boom in history was the launch of Facebook's News Feed.

By merging all updates from all the accounts you followed into a single continuous surface and having that serve as the default screen, Facebook News Feed simultaneously increased the efficiency of distribution of new posts and pitted all such posts against each other in what was effectively a single giant attention arena, complete with live updating scoreboards on each post. It was as if the panopticon inverted itself overnight, as if a giant spotlight turned on and suddenly all of us performing on Facebook for approval realized we were all in the same auditorium, on one large, connected infinite stage, singing karaoke to the same audience at the same time

News Feed unleashed a gold rush for social capital accumulation

Stories of teens A/B testing Instagram posts, yanking those which don't earn enough likes in the first hour, are almost beyond satire

In our own way, we are all Buzzfeed. We are all Kardashians.

The tighter the feedback loop, the quicker the adaptation

As people start following more and more accounts on a social network, they reach a point where the number of candidate stories exceeds their capacity to see them all

Almost any network that hits this inflection point turns to the same solution: an algorithmic feed.

Remember, status derives value from some type of scarcity. What is the one fundamental scarcity in the age of abundance? User attention. The launch of an algorithmic feed raises the stakes of the social media game. Even if someone follows you, they might no longer see every one of your posts.

Could social networks have chosen to keep likes and other such metrics about posts private, visible only to the recipient? Could we have kept this social capital arms race from escalating? Some tech CEO's now look back and, like Alan Greenspan, bemoan the irrational exuberance that led us to where we are now, but let's be honest, the incentives to lower interest rates on social capital in all these networks, given their goals and those of their investors, were just too great.

A social network like Path.com attempted to limit your social graph size to the Dunbar number, capping your social capital accumulation potential and capping the distribution of your posts. The exchange, they hoped, was some greater transparency, more genuine self-expression. The anti-Facebook. Unfortunately, as social capital theory might predict, Path did indeed succeed in becoming the anti-Facebook: a network without enough users.

Why Social Capital Accumulation Skews Young

While we're all status-seeking monkeys, young people tend to be the tip of the spear when it comes to catapulting new Status as a Service businesses, and may always will be. A brief aside here on why this tends to hold.

One is that older people tend to have built up more stores of social capital

Furthermore, old people tend to be hesitant about mastering new skills in general

Lastly, young people have a surplus of something which most adults always complain they have too little of: time

These modern forms of social capital are like new money. Not surprisingly, then, older folks, who are worse at accumulating these new badges than the young, often scoff at those kids

“I contain multitudes” (said the youngblood)

Incidentally, teens and twenty-somethings, more so than the middle-aged and elderly, tend to juggle more identities

Add to that this younger generation's preference for and facility with visual communication and it's clearly why the preferred social network of the young is Instagram and the preferred messenger Snapchat, both preferable to Facebook. Instagram because of the ease of creating multiple accounts to match one's portfolio of identities, Snapchat for its best in class ease of visual messaging privately to particular recipients.

Common Social Network Arcs

First utility, then social capital

This is the well-known “come for the tool, stay for the network” path. Instagram is a good example here given its growth from filter-driven utility to social photo sharing behemoth

In the end, I think most social networks, if they've made this journey, need to make a return to utility to be truly durable. Commerce is just one area where Instagram can add more utility for its users.

First social capital, then utility

Foursquare was this for me.

IMDb, Wikipedia, Reddit, and Quora are more prominent examples here

Utility, but no social capital

Plenty of huge social apps are almost entirely utilitarian, but it’s a brutally competitive quadrant

Most messaging apps fall into this category.

Social capital, but little utility

One could argue Foursquare actually lands here, but the most interesting company to debate in this quadrant is clearly Facebook.

Both social capital and utility simultaneously

Most social networks will offer some mix of both, but none more so than WeChat.

While I hear of people abandoning Facebook and never looking back, I can't think of anyone in China who has just gone cold turkey on WeChat.

Facebook faced much stiffer competition in these categories than WeChat did; for Facebook to build a better mousetrap in any of these, the requirements were much higher than for WeChat.

Take payments for example. The Chinese largely skipped credit cards, for a whole host of reasons.

That meant Alipay and WePay launched competing primarily with cash and all its familiar inconveniences. Compare that to, say, Apple Pay trying to displace the habit of pulling out a credit card in the U.S.

Social Network Asymptote 1: Proof of Work

What causes networks to suddenly hit that dreaded upper shoulder in the S-curve.

the choice of your proof of work is by definition an asymptote because the skills it selects for are not evenly distributed.

Every network has some ceiling on its ultimate number of contributors, and it is often a direct function of its proof of work.

This isn’t to say that proof of work is bad. In fact, coming up with a constraint that unlocks the creativity of so many people is exactly how Status as a Service businesses achieve product-market fit. Constraints force the type of compression that often begets artistic elegance, and forcing creatives to grapple with a constraint can foster the type of focused exertion that totally unconstrained exploration fails to inspire.

Social Network Asymptote 2: Social Capital Inflation and Devaluation

the volatility of status.

Social Capital Interest Rate Hikes

If a social network achieves enough success, it grows to a size that requires the imposition of an algorithmic feed

The problem, of course, is that this now diminishes the distribution of any single post from any single user.

Many institutions, especially news (journalism) outlets, had turned to Facebook to access some sweet sweet eyeball inventory in News Feeds.

one day, Facebook snapped its fingers like Thanos and much of that dependable reach evaporated into ash. No longer would every one of your Page followers see every one of your posts.

Social Capital Deflation: Scarcity Precarity or the Groucho Marx Conundrum

The problem with network effects is they unwind just as fast.

Go ask the MySpace guys how their network effect is going.

Utility, the other axis by which I judge social networks, tends to be uncapped in value. It's rare to describe a product or service as having become too useful. That is, it's hard to over-serve on utility.

Social network effects are different

Status relies on coordinated consensus to define the scarcity that determines its value. Consensus can shift in an instant

The Groucho Marx effect doesn't take effect immediately. In the beginning, a status hierarchy requires lower status people to join so that the higher status people have a sense of just how far above the masses they reside

However, there is some tipping point of popularity beyond which a restaurant, club, or social network can lose its cool.

f that group, the cool kids, pulls the ripcord, everyone tends to follow them to the exits. In fact, it’s usually the most high status or desirable people who leave first, the evaporative cooling effect of social networks.

Fashion is one of the most interesting industries for having understood this recurring boom and bust pattern in network effects and taken ownership of its own status devaluation cycles. Some strange cabal of magazine editors and fashion designers decide each season to declare arbitrarily new styles the fashion of the moment, retiring previous recommendations before they grow stale.

technology still has much to learn from industries like fashion about how to proactively manage scarcity, which is important when goods are rivalrous. Since many types of status are relative, it is, by definition, rivalrous. There is some equivalent of crop rotation theory which applies to social networks, but it's not part of the standard tech playbook yet. (Commons?)

A variant of this type of status devaluation cascade can be triggered when a particular group joins up.

youth migration out of Facebook when their parents signed on in force.

Patrick Collison linked to an interesting paper (PDF) on network effects traps in the physical world. They exist in the virtual world as well, and Status as a Service businesses are particularly fraught with them. Another instance is path dependent user composition. A fervent early adopter group can define who a new social network seems to be for, merely by flooding the service with content they love. Before concerted efforts to personalize the front page more quickly, Pinterest seemed like a service targeted mostly towards women

Mitigating Social Capital Devaluation Risk, and the Snapchat Strategy

In a leaked memo late last year, Evan Spiegel wrote about how one of the core values of Snapchat is to make it the fastest way to communicate. (This smells like selling a rationalization.)

This clarifies Snapchat's strategy on the 3 axes of my social media framework: Snapchat intends to push out further on the utility axis at the expense of the social capital axis which, as we’ve noted before, is volatile ground to build a long-term business on

Many will say, especially Snapchat itself, that it has been the anti-Facebook all along. Because it has no likes, it liberates people from destructive status games. To believe that is to underestimate the ingenuity of humanity in its ability to weaponize any network for status games.

In a clever move to unbound social capital accumulation and to turn a zero-sum game into a positive sum game, broadening the number of users working hard or engaging, Snapchat deprecated the very popular Best Friends list and replaced it with streaks. (cf 2010-10-05-StreaksForSelfImprovement)

If you and a friend Snap back and forth for consecutive days, you build up a streak which is tracked in your friends list.

This was literally proof of work as proof of friendship, quantified and tracked.

What's hilarious is how efficiently young people maintain streaks. It's a daily ritual that often consists of just quickly running down your friend list and snapping something random, anything, just to increment the streak count.

streaks have started to lose heat. Many younger users of Snapchat no longer bother with them.

Lengthening the Half-life of Status Games

The danger of having a proof of work burden that doesn't change is that eventually, everyone who wants to mine for that social currency will have done so, and most of it will be depleted

If, at that inflection, the service hasn't made headway in adding a lot of utility, the network can go stale.

One way to combat this, which the largest social networks tend to do better than others, is add new forms of proof of work.

Facebook, arguably has broadened the most of any social network in the world, going from a text-based status update tool for a bunch of Harvard students to a social network with so many formats and options that I can’t keep track of them all.

Doing so is a delicate balance, because it’s quite possible that Facebook is so many things to so many people that it isn't really anything to anyone anymore

Video games illuminate the proof of work cycle better than almost any category

A franchise like, say, Call of Duty, learns to manage this cycle by investing hundreds of millions of dollars to issue a new version of the game regularly. Each game offers familiarity but a new set of levels and challenges and environments

Some games can lengthen the cycle.

Some MMORPGs offer other benefits to players, like a sense of community, which last longer than the pure skill challenge of playing the game.

I suspect the frontier of social network strategy will draw more and more upon deep study of these adjacent and much older social capital games. Fashion, video games, religion, and society itself are some of the original Status as a Service businesses

Why Some Companies Will Always Struggle with Social

life is nothing if not a nested series of status contests.

The number of people who claim to be above status games exceeds those who actually are. I believe their professed distaste to be genuine, but even if it isn't, the danger of their indignation is that they actually become blind to how their product functions in some ways as Status as a Service business.

Apple Computer's social efforts tend to be social capital barren.

Since Apple positions itself as the leading advocate for user privacy, it will always be constrained on building out social features since many of them trade off against privacy

Still, it’s a false tradeoff to regard Apple’s emphasis on privacy as an excuse for awkward interactions like photo sharing on iOS.

The same inherent social myopia applies to Google which famously took a crack at building a social network of its own with Google+ (Google Plus).

Amazon and Netflix both launched social efforts though they’ve largely been forgotten.

Given the industrialization of fake reviews, and given how many people have Prime accounts, Amazon could build a social service simply to facilitate product recommendations and reviews from people you know and trust

The key value of a feature like this would be utility, but the status boost from being a product expert would be the energy turning the flywheel.

as an amplifier of Netflix as the modern water cooler, as a way to encourage herd behavior, social activity can serve as an added layer of buzz that for now is largely opaque to users inside Netflix apps

However, there's another reason that senior execs at most companies, even social networks, are ill-suited to designing and leveraging social features. It’s a variant of winner's curse.

Let Them Eat Cake

With social networks, one of the problems with seeing your own service through your users’ eyes is that every person has a different experience given who they follow and what the service's algorithm feeds them.

Your metrics may tell you that engagement is high and growing, but what is the composition of that activity, and who is exposed to what parts?

Until we have metrics that distinguish between healthy and unhealthy activity, social network execs largely have to steer by anecdote, by licking a finger and sticking it in the air to ascertain the direction of the wind. Some may find it hard to believe when execs plead ignorance when alerted of the scope of problems on their services, but I don't.

But perhaps even more confounding is that executives at successful social networks are some of the highest status people in the world. Forget first world problems, they have .1% or .001% problems. On a day-to-day basis, they hardly face a single issue that their core users grapple with constantly.

The Social Capital - Financial Capital Exchange

the dark matter that is social capital can be detected through those exchanges in which it converts into more familiar stores of value

I haven't found a clean definition of social capital but think of it as capital that derives from networks of people. If you want to explore the concept further, this page has a long list of definitions from literature

Perhaps the easiest way to spot social capital is to look at places where people trade it for financial capital.

Perhaps the most oft-cited example of a social-to-financial-capital exchange is the type pulled off by influencers on Instagram and YouTube.

Similarly, we see flows the other direction. People buying hundreds of thousands of followers on Twitter is one of the cleanest examples of trading financial capital for social capital. Later, that social capital can be converted back into financial capital any number of ways, including charging sponsors for posts.

Asia, where monetization models differ for a variety of cultural and contextual reasons, provides an even cleaner valuation of social capital. There, many social networks allow you to directly turn your social capital into financial capital, without leaving the network. For example, on live-streaming sites like YY, you can earn digital gifts from your viewers which cost actual money, the value of which you split with the platform. In the early days, a lot of YY consisted of cute girls singing pop songs. These days, as seen in the fascinating documentary People’s Republic of Desire, it has evolved into much more.

Social Capital Accumulation and Storage

It may sound obvious now, but consider the many apps and services that failed to provide something like this and saw all their value leak to other social networks. Hipstamatic came before Instagram and was the first photo filter app of note that I used on mobile. But, unlike Instagram, it charged for its filters and had no profile pages, social network, or feed. I used Hipstamatic filters to modify my iPhone photos and then posted them to other social networks like Facebook. Hipstamatic provided utility but captured none of the social capital that came from the use of its filters.

where it’s instructive is in examining those social networks which make such social capital accumulation difficult.

A good example is the anonymous social network, like Whisper or Secret.

users couldn't really claim any of the social capital they'd created there. Many of the things written on these networks were so toxic that to claim ownership of them would be social capital negative in the aggregate.

A network like Reddit solved this through its implementation of karma, but it's fair to say that it's also been a long struggle for Reddit to suppress the dark asymmetric incentives unlocked by detaching social capital from real-life identity and reputation

Social Capital Arbitrage

Because social networks often attract different audiences, and because the configuration of graphs even when there are overlapping users often differ, opportunities exist to arbitrage social capital across apps.

At some level, a huge swath of social media posts are just attempts to build status off of someone else's work. The two tenets at the start of this article predict that this type of arbitrage will always be with us

Social Capital Games as Temporary Energy Sources

A canonical example is Reddit, where users bring interesting links, among other content, in exchange for a currency literally named karma. Accumulate enough karma and you'll unlock other benefits, like the ability to create your own subreddit, or to join certain private subreddits.

Amazon isn't typically thought of as a company that understands social, but in its earliest days, before even Yelp, it employed a similar tactic to boost its volume of user reviews. Amazon Top Reviewers was a globally ranked list of every reviewer on all of Amazon.

Why Most Celebrity Apps Fail

Kardashian

From a social capital perspective, these create little value because they simply draw down upon the celebrity's own status.

Conclusion: Everybody Wants to Rule the World

From a user perspective, people are starting to talk more and more about the soul-withering effects of playing an always-on status game through the social apps on their always connected phones. You could easily replace Status as a Service with FOMO as a Service.

if you want control of your own happiness, don’t tie it to someone else’s scoreboard.

Before the tech giants of today, I combed through newsgroups, blogs, massive FAQs, and countless other resources built by people who felt, in part, a jolt of dopamine from the recognition that comes from contributing to the world at large. At Amazon, someone coined a term for this type of motivational currency: egoboo (short for, you guessed it, egoboost). Something like Wikipedia, built in large part on egoboo, is a damned miracle. I don’t want to lose that.

Reading the Senate Intelligence Committee reports on Russian infiltration of social networks in the 2016 election, what emerges is unsettling: in so many ways the Russians had a more accurate understanding of the users of these services than the product teams running them.

If we think of these networks as marketplaces trading only in information, and not in status, then we're only seeing part of the machine. The menacing phone call has been coming from inside the house all along. Ben Thompson refers to this naivete from tech executives as the pollyannish assumption.

Having worked on multiple products in my career, I’m sympathetic to the fact that no product survives engagement with humans intact, But this first era of Status as a Service businesses is closing, and pleading ignorance won’t work moving forward. To do so is to come off like Captain Louis Renault in Casablanca.


Edited: |

blog comments powered by Disqus